A recent Tax Tribunal case of Manchester Candle Company (MCC) v HMRC outlines the dangers of significant additional duties turning overseas purchases into significant losses.
The MCC purchased candles from a supplier in China in and agreed for delivery to be made in 6 batches.
The imposition of ADD on Chinese Candles meant that MCC could not carry on selling the candles for profit and so it cancelled their final order batch and had to forfeit its deposit. The appeal concerned whether MCC would have to pay duty on a batch of candles that left China after the imposition of ADD but were imported in to the EU after the ADD measures took effect.The tribunal had sympathy for MCC but had to dismiss its appeal. The legal provisions were clear in that the duty point for ADD was import to free circulation and not when the contract was entered into or the goods were shipped.
It is important that businesses purchasing goods from overseas have a clear understanding of whether there are any ADD measures in the pipeline that could impact on your purchases.
In an ideal world it would also be advisable to include a clause in your contract terms that allow you the right to cancel any contracts if ADD or other restrictive measures are imposed on them. We have come across a case where an importer was tied in to a loss making contract for 24 months because of the imposition of ADD.